Following an ABC News 20/20 investigation into the Better Business Bureau's controversial grading system, its national president apologized to consumers and business owners for "errors," while regional leaders met to discuss grading reforms.
Known as the nation's top consumer watchdog group, the BBB is accused by business owners and the Connecticut Attorney General of running a "pay for play" scheme in which A plus ratings are awarded to those who pay membership fees while F ratings are used to punish non-members.
On its website, the Better Business Bureau indicated that its executive committee gathered to discuss "ways to improve the BBB's rating system." According to media relations manager Alison Southwick, the organization is "considering a critical course of action which requires further work and research before we announce our concrete next steps."
To prove the BBB "pay for play" scheme, a group of Los Angeles businessman paid $425 and secured an A minus grade for "Hamas," a non-existent company named after the Middle Eastern terror group.
"Right now, this rating system is really unworthy of consumer trust or confidence," stated Connecticut attorney general Richard Blumenthal in the 20/20 interview.
In an official demand letter directed to the Better Business Bureau, Blumenthal called upon the organization to cease using its grading system, which he said was "potentially harmful and misleading" to consumers.
"The BBB accreditation and the BBB ratings systems is not about generating money," stated national president and CEO Steve Cox. He said the A minus grade for "Hamas" was given in error. "Plain and simple, we made a mistake," Cox advised ABC News.
Mistakes seem plentiful at the Better Business Bureau. The BBB also awarded an A minus rating to a non-existent sushi restaurant and an A plus rating to the skinhead, neo-Nazi organization Stormfront. Each rating cost $425.
"They ran the credit card and within 12 hours they were an approved, accredited member," stated an anonymous blogger, who runs the website www.bbbroundup.com. "They're more interested in the money than their credibility," he said.
The BBB indicated that the listings were "mistakes" by sales staff. "That's an inaccurate statement that business people are able to buy A's," Cox said. "We have more than 500,000 non-accredited businesses who have A ratings," he added.
In his demand letter to the Better Business Bureau, the Connecticut attorney general said, "I am deeply concerned that certain BBB practices threaten its reputation and effectiveness as a reliable resource for consumers."
Started as a non-profit group 98 years ago, the Better Business Bureau recently instituted an A plus through F grading system, effectively replacing the prior "satisfactory/unsatisfactory" ratings.
Critics say that the BBB has used its new grading system as part of an extensive telemarketing campaign to increase revenue and membership.
"I think the Better Business Bureau changed course and lost its way by adopting a system of pay to play that maybe enhanced its revenues but also greatly diminished its credibility and honesty," said Blumenthal, who was recently elected to the United States Senate from Connecticut.
"It's very troubling and it could be illegal because the failure to disclose to consumers could well be deceptive and misleading," he added.
The ABC News investigation also found that a number of popular non-member businesses were awarded F grades by the Better Business Bureau. For instance, the five-star Ritz Carlton Hotel in Boston was given an F rating after only two complaints.
"A million customers served, two complaints resulting in an F rating, seems to be somewhat unusual, to say the least," stated hotel general manager Erwin Schinnerl.
Celebrity chef Wolfgang Puck told 20/20 that parts of his food and restaurant empire have received an F grade because he refused to join the Better Business Bureau.
"You know, if you become a member, you're sure to get an A, but if you don't pay, it's very difficult to get an A," said Puck, who has regularly appeared on ABC's Good Morning America.
"I think where you have to join an organization to get a good grade is wrong," Puck said.
To file a complaint with the Attorney General's Office on this or any consumer protection issue, visit their website at www.myfloridalegal.com or call (866) 9-NO-SCAM (866-966-7226).
To review Bill Lewis' entire consumer protection series at the Highlands Today, visit www.williamlewis.us.
William E. Lewis Jr. is a credit repair expert with Credit Restoration Consultants and host of "The Credit Report with Bill Lewis" on AM 1470 WWNN, a daily forum for business and financial news, politics, economic trends, and cutting edge issues.
Source: The Credit Report with Bill Lewis - Highlands Today, an edition of the Tampa Tribune - Media General Group. http://www2.highlandstoday.com/content/2010/nov/21/bbb-accused-pay-play-scheme/
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